3.5 — Government Failures and Introduction to Political Economy — Readings

Buchanan was the 1986 winner of the Nobel Prize in Economics for his pioneering work in public choice theory. This work by him is a good summary of the economic analysis of politics using basic principles we use to study markets: equilibrium resulting from exchanges and interactions between optimizing individuals pursuing their own interests.

The second paper by William Baumol (who, if he lived longer, might have won the Nobel prize — he definitely earned one) is one of my favorite papers that I love to teach in classes that cover political economy. Everyone tries to better themselves, and entrepreneurship is a fundamental force in human society, the differences in outcome come from the institutions that channel entrepreneurship into productive, unproductive, or destructive outcomes.

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